Car rentals, like airlines, hard hit after attacks

By Fred Katayama
CNN Financial Correspondent

NEWARK, New Jersey (CNN) --The day terrorists attacked the United States, airports closed and stranded passengers drove cars off rental lots across the country. But several days later, the rental car business tanked.

At Newark Airport, for example, only a handful of customers lined up at one national rental company on Wednesday. Other counters had none.

Since September 11, the day of the disaster, the rental car companies have gone on a roller coaster ride.

"After that initial surge, business really dropped off, somewhere between 40 to 60 percent in the immediate aftermath of the tragedy. We have seen that kind of come back and it bounced at around 38 percent down and it has improved since then," said Joseph Cappy, chairman and CEO of Dollar Thrifty Automotive Group.

But fewer air travelers mean fewer car renters. They generate 90 percent of the business for some firms.

Already, two companies have warned that fallout from the attack will dent their earnings: Dollar Thrifty, which runs the Dollar and Thrifty brands, and ANC Rental, which owns Alamo and National.

"There is a possibility that the company could face a liquidity crisis in the first half of next year," said Henry Diamond, a diversified services analyst with Credit Suisse First Boston.

Hertz has already cut staff but wouldn't say how many. It is considering shrinking its fleet. So is ANC. Dollar is cutting its fleet by roughly 25 percent. These moves deliver another blow to automakers, because fleet business accounts for up to one-fifth of their sales.

DaimlerChrysler, Dollar's chief supplier, said it is adjusting its production schedules.